I don’t want to spend ages on this blog so hopefully I can stick to the key stuff and keep it short.
Talking of Shorts, I increased the Hedges I have via FTSE100 Spreadbets in recent days and you can see this on my ‘Trades’ page on WD1. I even placed my first Short on the Test System – I really hope we get a proper drop because it is essential that I try out how well the System Rules work to protect when we get a significant fall. We have designed the System to be infinitely scalable – but I don’t want to scale up much unless I have had the opportunity to test the System and Rules in a real-life big market sell-off. Ideally I will increase the scale from Jan 1st 2022.
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I finally managed to get an extra Spreadbet Account with igIndex and I started the Test System for my Index Spreadbets some days ago (incredibly, I still haven’t heard a peep out of CityIndex !!). Anyway, a couple of nights ago I looked at how far the FTSE100 dropped in March 2020 and worked out it was 36% at the worst level of Drawdown. You can see details of the Test System on my ‘Trades’ page on WD1.
It struck me I need to design my Rules and my System so that it can cope with a 36% Drawdown in its stride (although in practice, a 36% Drawdown would be extremely rare) and then it also hit me that really I should design for 50% Drawdown which I think some small Rule Changes will ‘easily’ manage and be mostly mechanical and just need a small degree of Hedging and the timing of those could be quite sloppy and not hurt Returns too much.
I have talked quite a lot on Twitter about a new Index Spreadbet System that I have been designing for about a month, and I have had long discussions with several friends regarding what the faults are and ways it can be refined and improved.
My intent was to produce a detailed Blog about the System and to includes loads of Examples of it in practice, but with my Health niggles that is too difficult at the moment, and for now I have just bashed something together quickly based on some email discussions with mates. The attraction of the System is that it is expected to generate in the region of 40%+ CAGR on the Initial Capital Employed and a higher ROCE based on the Average Capital used. In addition, it has controlled and limited risk and for most of a given year, we do nothing whatsoever – in fact, my biggest potential flaw that has been spotted is that if we Hedge too often, then the Returns will be reduced.
If you have listened to Podcast TPI 49 (link below if you haven’t), then you will probably have heard my fairly comprehensive health report and since recording that last Wednesday, I can thankfully say that it really does look like the Doctors have at last discovered the problem and for my h8ters the sad news is that I am not going to snuff it, and for the fans, I guess it is good news !!
I still have the pain but it is at a much lower level and the drastic changes to my diet (to be honest, it is not the end of the world and I did need a kick up the posterior with regards to my predilection for eating anything that I see and in crazy amounts) and I even managed to get outside today in the freezing cold and light rain, to pump up the tyres on my MX5. I thought it was a bit spongy when I last drove it, and with tyre pressures at 20 psi instead of the necessary 29, I guess that would explain it. I can’t wait to drive it next and feel the improvement.
I’m typing this starting text on Sunday afternoon after writing all of the Charts bit on Saturday night. I’m well pleased that I did it this way because I was feeling pretty good last night, but today it is not too bad but definitely worse than I would like.
If you are a bit behind, I have had some sort of problem in my abdomen area for 6 months and 4 Doctors have been baffled as to what the problem is; until finally a trip to A&E when I felt extremely bad a week or so ago, came up with the idea that it could be down to excess Stomach Acid burning my Stomach Wall. Sounds horrible.
A pretty good week as it happens, with Stocks doing nicely and I saw some excellent gains being reported on Twitter so the change of mood we had at the end of February seems to have been shaken off already. Of course the Nasdaq is behind a bit and the fabled ‘Rotation’ away from Growth to Value does seem to be taking place. Having said that it could easily be described more simply as a shift from Tech to Cyclicals. It is notable that we seem to have wobbled a bit as we got to both the end of January and the end of February.
There is no doubt plenty of sense in the Tech stuff getting more scrutiny because Valuations have been getting quite mad in a lot of cases; but I can’t help thinking that some Cyclicals are already looking pretty hot. One that has surprised me is On The Beach OTB, which I hold, which has now got higher than it was before the March 2020 collapse and that is quite amazing when you think how many challenges the Holiday Sector faces.
My intention when I am starting this late on Saturday night is to do something a bit different with the ‘Stocks & Markets’ Blog this weekend and if I can get cracking on this it should contain plenty of blurb about the Markets and what has happened and is likely to happen, and also more on my Strategy. If this plays out as I would like then you could be reading this on Sunday and I will issue a separate Charts Blog late on Sunday night and that one will obviously look at both long-term and short-term Technical factors and I won’t be including any other stuff in these Blogs.
Last week was obviously highly dramatic and more than a little scary and the speed of the drop was utterly bonkers and I understand it was one of the quickest falls from a Peak ever. This in itself is a technically worrying development and hardly hints at strength but I won’t talk too much about the Charting stuff in this Blog. I will try and break what I see as the key factors down into several headings. |
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